What Is ICO?
ICO stands for Initial Coin Offering. An ICO describes the process and result when a company or organization issues its own token under the guise of “cryptocurrency”. The primary claim and reasoning companies give is to grow and build an ecosystem and create a token for use inside the ecosystem.
The reality is that ICOs are used to raise money. It is very, very important to note that ICOs do NOT grant any type of ownership to the purchaser. ICOs are not ownership stakes and they do not have any claims on profits or dividends.
So, are ICOs legal? The Securities And Exchange Commission in the United States is battling with this exact issue. The SEC has issued guidance in 2018 located here. The SEC is also pursuing many of these startups to include enforcing penalties and reaching settlements.
To this point essentially all ICOs use an ERC-20 token using the Ethereum blockchain. ICOs have nothing to do with Bitcoin. Bitcoin is completely separate.
At the end of the day ICO tokens are nothing more than frequent flier miles, Chuck E Cheese arcade tokens, or the tokens you find inside a casino or arcade. They are like the tickets people gather when they are playing skeeball. The tokens have “value” within the confines of the ecosystem inside of which they reside. Children can use game tokens to play games in an arcade, but outside of that exact arcade those same tokens have zero value.
It remains to be seen what the future holds for ICOs and how the regulators deal with ICOs and the associated scams and securities law violations. TheBlockCrypto.com is one media outlet that is asking the tough questions about ICOs.
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